Universal Trades Corporation Vs Chief Commissioner of Income Tax and Others

M. Ramachandran, J.@mdashUniversal Trades Corporation, a partnership firm, challenges exhibit P-3 order issued u/s 119(2)(a) of the Income Tax Act, 1961. The issue concerns claim for waiver of interest, leviable under sections 234B and 234C of the Act. The dispute arose in respect of the assessment year 1997-98.

2. A return of income had been submitted by the petitioner on October 31, 1997, in respect of the assessment year 1997-98. Being an exporter of sea foods, in view of the double taxation avoidance agreement between the Government of India and the Netherlands, they claimed reliefs. But they could not furnish documents supporting their claims, and the Assessing Officer, accepting the returns, raised a demand for Rs. 15,02,250 which included interest under sections 234B and 234C of the Act. The matter was, therefore, taken to the first respondent, Chief Commissioner of Income Tax, by way of a waiver petition after paying the tax minus the interest. No appeal had been filed by the assessee challenging the assessment and the submission was only in respect of the demand for interest.

3. Though the claim was based on the text of the Board''s order dated May 23, 1996, at the time of hearing the contention could not be substantiated. Dealing with the matter, the first respondent observed as following, in exhibit P-3 :

"The assessee''s representative conceded that it will not be possible for him to support the claim with reference to any of the specific clauses in the Board''s order. In view of this position, the assessee''s application seeking waiver of interest under sections 234B and 234C of the Income Tax Act for the assessment year 1997-98 is rejected as being without any merit."

4. The advocate, Sri P. Balakrishnan, submits that the petitioner was having a bona fide claim, as G. S. R. No. 382(E), dated March 27, 1989, reported in [1989] 177 ITR 72 in fact governed the issue. It had been submitted that at the time of assessment the petitioner had not been heard and the order therefore was in violation of the principles of natural justice. He was at least entitled to a deduction u/s 80HHC of the Act.

5. It is also submitted that the Board''s circular, referred to by the Chief Commissioner in exhibit P-3 was in fact published as a press note, on May 21, 1996, and it appeared in Indian Jute Mills Association Vs. Commissioner of Wealth Tax, . The benefit thereby was sought to be given in certain cases where advance tax was not paid at the relevant time. This had been followed with due diligence, and if there was a mistake, the petitioner ought not to have been penalised, as it was a case where the returns were voluntarily filed and advance tax was not paid on the advice that it was not payable as his income was not taxable under the Income Tax Act.

6. The standing counsel for the Revenue submitted that the tax liability was strict in nature and a relaxation therefore was impermissible. He referred to the endorsement in the return filed, showing the double taxation relief was disallowed, for want of proper certificate. A hearing at that stage was not possible, as it was the obligation of the assessee to make available with the return all relevant documents. Consequently, liability for payment of advance tax had arisen, as the payment of tax was expected to be made, as and when the assessee earned the income.

7. Relying on the counter affidavit filed, it had also been submitted that after assessment there was only a request for payment by instalments. A rectification petition was however filed, but it was belated, and the claim was beyond the purview of such a petition u/s 154, for want of any supporting documents. The Chief Commissioner too had filed an affidavit, and reiterated that on the strength of the decision reported in Commissioner of Income Tax Vs. R. Ramalingair, , a hearing is not expedient when interest is charged at the time of assessment. A copy of the order of the Central Board of Direct Taxes dated May 23, 1996, was also made available as exhibit R-1(A). As the conditions were not satisfied, waiver was not permissible.

8. It is a settled position that interest under sections 234A and 234B are compensatory in character (see Ranchi Club Ltd. Vs. Commissioner of Income Tax and Others ). Therefore, the contention that they were brought to the statute book substituting the penal provisions and hence a hearing was warrant- ed, may not be a correct view. This is the same view taken in the decision reported in A.M. Sainalabdeen Musaliar Vs. Union of India (UOI) and Others, , it is submitted,

9. The next contention was on the basis of the Board''s order dated May 23, 1996. It is seen that exhibit R-1(A) which is authentic differs from the press note as published in Indian Jute Mills Association Vs. Commissioner of Wealth Tax, . The standing counsel points out that the press note could not be authentic by any standards, and exhibit R-1(A) alone governs the issue. He had also referred to a judgment of this court in O. P. No. 20524 of 2000, rendered on an identical situation, upholding the plea of the Department. This position is therefore undisputable.

10. The petitioner had referred to the decision in Commissioner of Income Tax Vs. Hindustan Electro Graphites Ltd., in support of his contention that interest was a levy and amounted to a punishment. But the principle decided in the above case was that the return filed on the date when it was filed was correct, and the amending Act with retrospective effect could not have been a ground for levying additional tax. This was also the gist of the decision reported in Evershine Plastics Vs. Assistant Commissioner (Assessment) and Another, In fact this position has been taken care of in the circular referred to above.

11. As to the claim of the petitioner u/s 80HHC, standing counsel submits that the assessee had not projected such a claim, and the only question that survived was as to the justifiability of interest for delayed payment of Income Tax. Circumstances might have conspired against the petitioner, but that is no reason for this court to interfere in the matter.

12. In the aforesaid circumstances, I find no substantial reasons to interfere in the matter. Of course, exhibit R-1(A), by paragraph 2(a) sought to give relief even to a person, who did not file a return in unavoidable circumstances, and adopting the said yardstick, it might have been possible to canvas for a position that the petitioner''s claims deserved a second look. But as the special contingency is not included in the authentic copy of the circular, it may not be possible for this court to exercise its jurisdiction in favour of the assessee. Hence, the original petition is dismissed.